FAILMA, LORELYN F.

TAXATION LAW I ATTY. J. IBE

1. Prohibition against imprisonment of non payment of debt or poll tax-

PEOPLE VS LINSANGAN
G.R. NO. L-43290, December 21, 1935
Abad Santos, J:

Facts:
Appellant was prosecuted for non-payment
of the cedula or poll tax under section 1439,
in connection with section 2718, of the
Revised Administrative Code.
He was sentenced to suffer imprisonment
for five days and to pay the cost.
This case was tried and decided by the
court before the Constitution of the
Philippines took effect, however while the
appeal was pending the Constitution
became effective and Article III section 1
provides that “no person shall be
imprisoned for debt or nonpayment of a poll
tax”

Issue: Whether, the judgment can still stand

despite the passage of the Constitution?
Held:
No, According to the Supreme Court, it
seems too clear that section 2718 of the
Revised Administrative Code is inconsistent
with section 1, clause 12 of Article III of the
Constitution, in that while the former
authorizes imprisonment for nonpayment of
the poll tax or cedula tax, the latter prohibits
it. If follows that upon the inauguration of
the Government of the Commonwealth ,
said section 2718 of the Revised
Administrative Code became inoperative,
and no judgment of conviction can be based
thereon.

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FAILMA, LORELYN F.
TAXATION LAW I ATTY. J. IBE

2. Taxation shall be Uniform, equitable. The Congress shall evolve a progressive system
of taxation.
Francis Churchill vs. Venancio
Conception
GR No. 11572, September 22, 1916
Trent, J:
Facts:
Act No. 2339 imposed an annual tax of
P4.00 per sq.m upon the electric signs,
billboards and space used for posting or
displaying temporary signs, and all signs
displayed on premises not occupied by
building. This was amended to P2.00.
Francis A. Churchill and Stewart Tait,
copartners doing business under the firm
name and style of the Mercantile
Advertising Agency, owners of a sign or
billboard containing an area of 52 square
meters constructed on private property in
the city of Manila and exposed to public
view, were taxes thereon P104. The tax was
paid under protest as it was destroying
billboards and advertising business
depends on the use of such signs or
billboards.
thereof upon every electric sign, bill-board,
etc., wherever found in the Philippine
Islands. Or in other words, "the rule of
taxation" upon such signs is uniform
throughout the Islands. The rule, which we
have just quoted from the Philippine Bill,
does not require taxes to be graded
according to the value of the subject or
subjects upon which they are imposed,
especially those levied as privilege or
occupation taxes.
It is not for the judiciary to say that the
classification upon which the tax is based "is
mere arbitrary selection and not based upon
any reasonable grounds." The Legislature
selected signs and billboards as a subject
for taxation and it must be presumed that it,
in so doing, acted with a full knowledge of
the situation.

Issue: Whether not the tax imposed is

unconstitutional due to its lack of uniformity
and was not regarded as to the value

Held:
No. According to the Supreme Court, A tax
is uniform when it operates with the same
force and effect in every place where the
subject of it is found. "Uniformity," as
applied to the constitutional provision that all
taxes shall be uniform, means that all
property belonging to the same class shall
be taxed alike.

The statute under consideration imposes a

tax of P2 per square meter or fraction

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FAILMA, LORELYN F.
TAXATION LAW I
3. Delegated authority of President to impose tariff rates, import and export quotas,
tonnage and wharfage dues
Marc Donnelly vs Manuel Agregado
GR No. L-4510, May 31, 1954
Bautista-Angelo, J:
Facts:
Congress enacted Commonwealth Act No.
728, making it unlawful for any person,
association or corporation to export
agricultural or industrial products,
merchandise, articles, materials, and
supplies without a permit from the President
of the Philippines.
This Act confers upon the President
authority to "regulate, curtail, control, and
prohibit the exportation of materials abroad
and to issue such rules and regulations as
may be necessary to carry out the
provisions of this Act, through such
department or office as he may designate,
thus he promulgated EO No. 3 requiring an
export license must first be obtained from
the Philippine Sugar Administration and
upon payment of P10 per tons of the
materials to be exported.
Petitioner contends that the resolution of the
Cabinet of October 24, 1947, fixing the
schedule of royalty rates on metal exports
and providing for their collection constitutes
an undue delegation of legislative powers
because, in substance, it creates and
imposes an ad valorem tax.
Issue: Whether there is an undue
delegation of legislative powers when the
President fixed the schedule of the royalty
rates?
Held:
No. In the present case, our Constitution
expressly authorizes such delegation.
(Article VI, section 22 [2].) This is so
because the royalty rates may take the form
of tariff rates. At any rate, Commonwealth
Act No. 728 confers upon the President
ATTY. J. IBE
authority to regulate, curtail, control, and
prohibit the exportation of scrap metals, and
in this authority is deemed included the
power to exact royalties for permissive or
lawful use of property right.
This resolution is perfectly legal because it
was done by authority of Commonwealth
Act No. 728 and in pursuance of an express
provision of our Constitution. The fact that
the resolution was approved by the Cabinet
and the collection of the royalty fees was
not decreed by virtue of an order issued by
the President himself does not, in our
opinion, invalidate said resolution because it
cannot be disputed that the act of the
Cabinet is deemed to be, and essentially is,
the act of the President.
The President, acting under the authority
granted by said Act, did not, in promulgating
Executive Order No. 3, choose to place a
complete ban on the exportation of scrap
metals, but permitted such exportation upon
payment of certain royalty. If the President
can prohibit altogether such exportation, a
fortiori he can, as he did, impose conditions
and limitation she may deem proper in
granting the privilege, one of them being the
payment of royalties similar to the ones
subject of the present litigation.
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FAILMA, LORELYN F.
TAXATION LAW I
4. Actually, directly and exclusively clause (Art. VI, Section 28(3) and Art. XIV Sec, 4(3)
Lung Center vs Quezon City
GR No. 144104, June 29, 2004
Callejo, Sr., J:
Facts:
Lung Center of the Philippines is a non-stock
and non-profit entity established on January 16,
1981 by virtue of Presidential Decree No. 1823.
It is the owner of a parcel of land located at
Quezon City.
A big space on at the ground floor is being
leased to private parties for canteen and small
spaces, and to medical or professional
practitioners. Almost one-half of the entire area
on the left side of the building was idle. The
petitioners accept paying and non-paying
patients.
On June 7, 1993, both the land and the hospital
building of the petitioner were assessed for real
property taxes in the amount of ₱4,554,860 by
the City Assessor of Quezon City. The petitioner
filed a Claim for Exemption5 from real property
taxes with the City Assessor, predicated on its
claim that it is a charitable institution, however it
was denied.
Issue: Whether the petitioner is entitled to tax
exemption?
Held:
The Supreme Court held that the petitioner is a
charitable institution within the context of the
1973 and 1987 Constitutions.
As a general principle, a charitable institution
does not lose its character as such and its
exemption from taxes simply because it derives
income from paying patients, whether out-
patient, or confined in the hospital, or receives
subsidies from the government, so long as the
money received is devoted or used altogether to
the charitable object which it is intended to
achieve; and no money inures to the private
benefit of the persons managing or operating the
institution.
ATTY. J. IBE
Even as we find that the petitioner is a charitable
institution, we hold, anent the second issue, that
those portions of its real property that are leased
to private entities are not exempt from real
property taxes as these are not actually, directly
and exclusively used for charitable purposes.
The settled rule in this jurisdiction is that laws
granting exemption from tax are construed
strictissimi juris against the taxpayer and liberally
in favor of the taxing power. Taxation is the rule
and exemption is the exception. The effect of an
exemption is equivalent to an appropriation.
Hence, a claim for exemption from tax payments
must be clearly shown and based on language
in the law too plain to be mistaken.
Under the 1973 and 1987 Constitutions and
Rep. Act No. 7160 in order to be entitled to the
exemption, the petitioner is burdened to prove,
by clear and unequivocal proof, that (a) it is a
charitable institution; and (b) its real properties
are ACTUALLY, DIRECTLY and EXCLUSIVELY
used for charitable purposes. "Exclusive" is
defined as possessed and enjoyed to the
exclusion of others; debarred from participation
or enjoyment; and "exclusively" is defined, "in a
manner to exclude; as enjoying a privilege
exclusively." If real property is used for one or
more commercial purposes, it is not exclusively
used for the exempted purposes but is subject to
taxation. The words "dominant use" or "principal
use" cannot be substituted for the words "used
exclusively" without doing violence to the
Constitutions and the law. Solely is synonymous
with exclusively.
Accordingly, we hold that the portions of the land
leased to private entities as well as those parts
of the hospital leased to private individuals are
not exempt from such taxes.45 On the other
hand, the portions of the land occupied by the
hospital and portions of the hospital used for
its patients, whether paying or non-paying,
are exempt from real property taxes.
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FAILMA, LORELYN F.
TAXATION LAW I
5. Prohibition against taxation of non-stock, non-profit educational institutions
Angeles University Foundation vs. City
Angeles
GR No. 189999, June 27, 2012
Villarama Jr., J:
Facts:
Petitioner Angeles University Foundation
(AUF) is an educational institution
established on May 25, 1962 and was
converted into a non-stock, non-profit
education foundation under the provisions
of Republic Act (R.A.) No. 60554 on
December 4, 1975.
August 2005, petitioner filed with the Office
of the City Building Official an application for
a building permit for the construction of an
11-storey building of the Angeles University
Foundation Medical Center in its main
campus. Said office issued a Building
Permit Fee Assessment in the amount of
P126,839.20. An Order of Payment was
also issued by the City Planning and
Development Office, Zoning Administration
Unit requiring petitioner to pay the sum of
P238,741.64 as Locational Clearance Fee.
The Petitioner paid a total of P826,662.99
under protest including the real property tax.
Respondents further averred that the
property which was imposed a RPT will be
used as dormitory and therefore cannot be
considered as used exclusively for
educational activities.
Issue: Whether the Petitioner is exempted
from the payment of building permit fees as
well as real property tax?
Held:
No. Petitioner stresses that the tax
exemption granted to educational stock
corporations which have converted into non-
profit foundations was broadened to include
any other charges imposed by the
ATTY. J. IBE
Government as one of the incentives for
such conversion.
Note that the "other charges" mentioned in
Sec. 8 of R.A. No. 6055 is qualified by the
words "imposed by the Government on all x
x x property used exclusively for the
educational activities of the foundation."
Building permit fees are not impositions on
property but on the activity subject of
government regulation. While it may be
argued that the fees relate to particular
properties, i.e., buildings and structures,
they are actually imposed on certain
activities the owner may conduct either to
build such structures or to repair, alter,
renovate or demolish the same.
On the contention of the exemption on the
payment of RPT, What is meant by actual,
direct and exclusive use of the property for
charitable purposes is the direct and
immediate and actual application of the
property itself to the purposes for which the
charitable institution is organized. It is not
the use of the income from the real property
that is determinative of whether the property
is used for tax-exempt purposes.
Petitioner failed to discharge its burden to
prove that its real property is actually,
directly and exclusively used for educational
purposes. While there is no allegation or
proof that petitioner leases the land to its
present occupants, still there is no
compliance with the constitutional and
statutory requirement that said real property
is actually, directly and exclusively used for
educational purposes. The respondents
correctly assessed the land for real property
taxes for the taxable period during which the
land is not being devoted solely to
petitioner’s educational activities.
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FAILMA, LORELYN F.
TAXATION LAW I
6. Majority vote of the congress to grant tax exemption-
John Hay Peoples Alternative Coalition
vs. Victor Lim
GR No. 119775, October 24, 2003
Carpio Morales, J:
Facts:
Petitioners assail, in the main, the
constitutionality of Presidential Proclamation
No. 420, Series of 1994, "CREATING AND
DESIGNATING a portion of the area
covered by the former Camp John [Hay] as
THE JOHN HAY Special Economic Zone
pursuant to R.A. No. 7227.
R.A. No. 7227 granted the Subic SEZ
incentives ranging from tax and duty-free
importations, exemption of businesses
therein from local and national taxes, to
other hallmarks of a liberalized financial and
business climate.
And R.A. No. 7227 expressly gave authority
to the President to create through executive
proclamation, subject to the concurrence of
the local government units directly affected,
other Special Economic Zones (SEZ) in the
areas covered respectively by the Clark
military reservation, the Wallace Air Station
in San Fernando, La Union, and Camp John
Hay.
respondents contend that by extending to
the John Hay SEZ economic incentives
similar to those enjoyed by the Subic SEZ
which was established under R.A. No. 7227,
the proclamation is merely implementing the
legislative intent of said law to turn the US
military bases into hubs of business activity
or investment. They underscore the point
that the government's policy of bases
conversion can not be achieved without
extending the same tax exemptions granted
by R.A. No. 7227 to Subic SEZ to other
SEZs.
ATTY. J. IBE
Issue: Whether Proclamation No. 420 is
constitutional by providing for national and
local tax exemption within and granting
other economic incentives to the John Hay
Special Economic Zone;
Held: No. Petitioners argue that nowhere in
R. A. No. 7227 is there a grant of tax
exemption to SEZs yet to be established in
base areas, unlike the grant under Section
12 thereof of tax exemption and investment
incentives to the therein established Subic
SEZ. The grant of tax exemption to the John
Hay SEZ, petitioners conclude, thus
contravenes Article VI, Section 28 (4) of the
Constitution which provides that "No law
granting any tax exemption shall be passed
without the concurrence of a majority of all
the members of Congress is with merit
It is clear that under Section 12 of R.A. No.
7227 it is only the Subic SEZ which was
granted by Congress with tax exemption,
investment incentives and the like. There is
no express extension of the aforesaid
benefits to other SEZs still to be created at
the time via presidential proclamation.
More importantly, the nature of most of the
assailed privileges is one of tax exemption.
It is the legislature, unless limited by a
provision of the state constitution, that has
full power to exempt any person or
corporation or class of property from
taxation, its power to exempt being as broad
as its power to tax.42 Other than Congress,
the Constitution may itself provide for
specific tax exemptions,43 or local
governments may pass ordinances on
exemption only from local taxes.
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FAILMA, LORELYN F.
TAXATION LAW I ATTY. J. IBE

The challenged grant of tax exemption

would circumvent the Constitution's
imposition that a law granting any tax
exemption must have the concurrence of a
majority of all the members of Congress.

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FAILMA, LORELYN F.
TAXATION LAW I ATTY. J. IBE

7. Prohibition on use of tax levied for special purpose –

GASTON VS REPUBLIC PLANTERS
GR No. L-77194, March 15, 1988
Melencio- Herrera, J:
Facts:
Respondent Philippine Sugar Commission
(PHILSUCOM, for short) was formerly the
government office tasked with the function
of regulating and supervising the sugar
industry until it was superseded by its co-
respondent Sugar Regulatory
Administration.
Petitioners wants to implement the transfer
and distribution of the Shares of Stocks to
the sugar producers.
Respondents PHILSUCOM and SRA, for
their part, squarely traverse the petition
arguing that no trust results from Section 7
of P.D. No. 388; that the stabilization fees
collected are considered government funds
under the Government Auditing Code
Issue: Whether the stabilization fees
collected from sugar planters and millers
pursuant to Section 7 of P.D. No. 388 are
funds in trust for them, or public funds?
Having been levied for a special purpose,
the revenues collected are to be treated as
a special fund, to be, in the language of the
statute, "administered in trust' for the
purpose intended. Once the purpose has
been fulfilled or abandoned, the balance, if
any, is to be transferred to the general funds
of the Government. The character of the
Stabilization Fund as a special fund is
emphasized by the fact that the funds are
deposited in the Philippine National Bank
and not in the Philippine Treasury, moneys
from which may be paid out only in
pursuance of an appropriation made by law.
That the fees were collected from sugar
producers, planters and millers, and that the
funds were channeled to the purchase of
shares of stock in respondent Bank do not
convert the funds into a trust fired for their
benefit nor make them the beneficial owners
of the shares so purchased. It is but rational
that the fees be collected from them since it
is also they who are to be benefited from
the expenditure of the funds derived from it.

Held: Neither, According to the Supreme

Court, the stabilization fees collected are in
the nature of a tax, which is within the
power of the State to impose for the
promotion of the sugar industry The
collections made accrue to a "Special
Fund," a "Development and Stabilization
Fund," almost Identical to the "Sugar
Adjustment and Stabilization Fund" created
under Section 6 of Commonwealth Act 567.
1 The tax collected is not in a pure exercise
of the taxing power. It is levied with a
regulatory purpose, to provide means for
the stabilization of the sugar industry. The
levy is primarily in the exercise of the police
power of the State.

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FAILMA, LORELYN F.
TAXATION LAW I
8.
9. President’s veto power on appropriation, revenue and tariff bills -
BENGZON VS DRILON
GR NO. 103524, April 15, 1992
Gutierrez, Jr., J:
Facts:
The issue in this petition is the
constitutionality of the veto by the President
of certain provisions in the General
Appropriations Act for the Fiscal Year 1992
relating to the payment of the adjusted
pensions of retired Justices of the Supreme
Court and the Court of Appeals.
President Aquino, however vetoed House
Bill No. 16297 on July 11, 1990 on the
ground that according to her "it would erode
the very foundation of the Government's
collective effort to adhere faithfully to and
enforce strictly the policy on standardization
of compensation as articulated in Republic
Act No. 6758 known as Compensation and
Position Classification Act of 1989." She
further said that "the Government should not
grant distinct privileges to select group of
officials whose retirement benefits under
existing laws already enjoy preferential
treatment over those of the vast majority of
our civil service servants."
Issue: Whether the subject veto is a line
item veto
Held:
The act of the Executive in vetoing the
particular provisions is an exercise of a
constitutionally vested power. But even as
the Constitution grants the power, it also
provides limitations to its exercise. The veto
power is not absolute.
However, when it comes to appropriation,
revenue or tariff bills, the Administration
needs the money to run the machinery of
government and it can not veto the entire
ATTY. J. IBE
bill even if it may contain objectionable
features. The President is, therefore,
compelled to approve into law the entire bill,
including its undesirable parts. It is for this
reason that the Constitution has wisely
provided the "item veto power" to avoid
inexpedient riders being attached to an
indispensable appropriation or revenue
measure.
An examination of the entire sections and
the underlined portions of the law which
were vetoed will readily show that portions
of the item have been chopped up into
vetoed and unvetoed parts. Less than all of
an item has been vetoed. Moreover, the
vetoed portions are not items. They are
provisions.
More ironic is the fact that misinformation
led the Executive to believe that the items in
the 1992 Appropriations Act were being
vetoed when, in fact, the veto struck
something else.
What were really vetoed are:
(1) Republic Act No. 1797 enacted as early
as June 21, 1957; and
(2) The Resolution of the Supreme Court
dated November 28, 1991 in Administrative
Matter No. 91-8-225-CA.
There are no lengthy justifications or
citations of authorities to declare that no
President may veto the provisions of a law
enacted thirty-five (35) years before his or
her term of office. Neither may the President
set aside or reverse a final and executory
judgment of this Court through the exercise
of the veto power.
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FAILMA, LORELYN F.
TAXATION LAW I ATTY. J. IBE

10. Non-impairment of jurisdiction of the Supreme Court

SAN MIGUEL VS AVELINO Since both under the Constitution and the
GR No. 39699, March 4, 1979 Judiciary Act, respondent Judge is vested
Fernando, J,: with jurisdiction to make such a declaration,
it would be, at the very least, premature for
Facts: the corrective power of this Tribunal to be
interposed , just because he did not, "at
Petitioner San Miguel Corporation expected [that] stage of the proceedings," grant -the
the speedy determination of its claim that motion to dismiss on the allegation that
the challenged ordinance of respondent City there was lack of jurisdiction
of Mandaue imposing a specific tax be
nullified. The petitioner was detested the
failure of the respondent Judge Celso
Avelino to grant its motion to dismiss on the
ground of lack of jurisdiction.
Respondent City, in accordance with
Presidential Decree No. 231, enacted in
1973, to take effect on January 1, 1974, the
challenged ordinance, otherwise known as
the Mandaue City Tax Code. The City
Treasurer, on April 1, 1974, demanded from
petitioner payment of the made specific tax
on the total volume of beer it produced in
the City of Mandaue.
Petitioner, on April 8, 1974, contested the
correction of said specific tax "on the ground
that Section 12(e) (7) in relation to Section
12(e) (1) and (2), Mandaue City Ordinance
No. 97, is illegal and void because it
imposed a specific tax beyond its territorial
jurisdiction.
Issue: Whether there was lack of jurisdiction
by the respondent judge when he did not
grant the motion to dismiss?
Held:
No. In the pending suit by respondent City,
sought to be dismissed by petitioner
corporation, it specifically prayed "that
Ordinance No. 97, Series of 1973, of the
herein plaintiff is valid, legal, and
enforceable in accordance with law;

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FAILMA, LORELYN F.
TAXATION LAW I ATTY. J. IBE

11. Grant of power to the local government units to create its own source of revenue
Manila Electric Co. v. Province of Laguna
GR. No. 131359, May 5, 1999
Vitug, J,:
Facts:
Certain municipalities of the Province of
Laguna, including, Biñan, Sta. Rosa, San
Pedro, Luisiana, Calauan and Cabuyao, by
virtue of existing laws then in effect, issued
resolutions through their respective
municipal councils granting franchise in
favor of petitioner MERALCO.
Republic Act No. 7160, otherwise known as
the "Local Government Code of 1991," was
enacted to take effect on 01 January 1992
enjoining local government units to create
their own sources of revenue and to levy
taxes, fees and charges, subject to the
limitations expressed therein, consistent
with the basic policy of local autonomy. And
pursuance thereof, respondent province
enacted Laguna Provincial Ordinance No.
01-92, effective 01 January 1993 imposing
a franchise tax on businesses enjoying a
franchise
Respondent Provincial Treasurer sent a
demand letter to MERALCO for the
corresponding tax payment. A formal claim
for refund was thereafter sent by MERALCO
to the Provincial Treasurer of Laguna
claiming that the franchise tax it had paid
and continued to pay to the National
Government pursuant to P.D. 551 already
included the franchise tax imposed by the
Provincial Tax Ordinance
the basic law or by statute. Presently, under
Article X of the 1987 Constitution, a general
delegation of that power has been given in
favor of local government units.
Nevertheless, the fundamental law did not
intend the delegation to be absolute and
unconditional; the constitutional objective
obviously is to ensure that, while the local
government units are being strengthened
and made more autonomous, 6 the
legislature must still see to it that (a) the
taxpayer will not be over-burdened or
saddled with multiple and unreasonable
impositions; (b) each local government unit
will have its fair share of available
resources; (c) the resources of the national
government will not be unduly disturbed;
and (d) local taxation will be fair, uniform,
and just.
The 1991 Code explicitly authorizes
provincial governments, notwithstanding
"any exemption granted by any law or other
special law, . . . (to) impose a tax on
businesses enjoying a franchise.

Issue: Whether MERALCO’s petition has

merit?

Held:
Prefatorily, it might be well to recall that
local governments do not have the inherent
power to tax 4 except to the extent that such
power might be delegated to them either by

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FAILMA, LORELYN F.
TAXATION LAW I
12.
13. Limited Power of the Congress to delegate taxing power to the President
Southern Cross Cement vs Cement
Manufacturers Assoc. of the Philippines
GR No. 158540, August 3, 2005
Tinga, J.:
Facts:
the case centers on the interpretation of
provisions of Republic Act No. 8800, the
Safeguard Measures Act ("SMA"), which
was one of the laws enacted by Congress
soon after the Philippines ratified the
General Agreement on Tariff and Trade
(GATT) and the World Trade Organization
(WTO) Agreement.3 The SMA provides the
structure and mechanics for the imposition
of emergency measures, including tariffs, to
protect domestic industries and producers
from increased imports which inflict or could
inflict serious injury on them.
hilcemcor, an association of at least
eighteen (18) domestic cement
manufacturers filed with the DTI a petition
seeking the imposition of safeguard
measures on gray Portland cement,5 in
accordance with the SMA. After the DTI
issued a provisional safeguard measure,6
the application was referred to the Tariff
Commission for a formal investigation
pursuant to Section 9 of the SMA and its
Implementing Rules and Regulations, in
order to determine whether or not to impose
a definitive safeguard measure on imports
of gray Portland cement. The Tariff
Commission held public hearings and
conducted its own investigation, then on 13
March 2002, issued its Formal Investigation
Report that no definitive general safeguard
measure be imposed on the importation of
gray Portland cement.
Issue: Whether the Authority to delegate
power to impose safeguard measures is an
undue delegation?
Held:
ATTY. J. IBE
The Congress may, by law, authorize the
President to fix within specified limits, and
subject to such limitations and restrictions
as it may impose, tariff rates, import and
export quotas, tonnage and wharfage dues,
and other duties or imposts within the
framework of the national development
program of the Government.
The qualifiers mandated by the Constitution
on this presidential authority attain
primordial consideration. First, there must
be a law, such as the SMA. Second, there
must be specified limits, a detail which
would be filled in by the law. And further,
Congress is further empowered to impose
limitations and restrictions on this
presidential authority. On this last power,
the provision does not provide for specified
conditions, such as that the limitations and
restrictions must conform to prior statutes,
internationally accepted practices, accepted
jurisprudence, or the considered opinion of
members of the executive branch.
The Court recognizes that the authority
delegated to the President under Section
28(2), Article VI may be exercised, in
accordance with legislative sanction, by the
alter egos of the President, such as
department secretaries. Indeed, for
purposes of the President’s exercise of
power to impose tariffs under Article VI,
Section 28(2), it is generally the Secretary
of Finance who acts as alter ego of the
President. The SMA provides an
exceptional instance wherein it is the DTI or
Agriculture Secretary who is tasked by
Congress, in their capacities as alter egos
of the President, to impose such measures.
Certainly, the DTI Secretary has no inherent
power, even as alter ego of the President, to
levy tariffs and imports.
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FAILMA, LORELYN F.
TAXATION LAW I ATTY. J. IBE

14. All appropriation, revenue or tariff bills shall originate exclusively in the House of
Representatives, but the Senate may propose or concur with amendments
Arturo Tolentino vs. Secretary of Finance
GR No. 115455, August 25, 1994
Facts:
The value-added tax (VAT) is levied on the
sale, barter or exchange of goods and
properties as well as on the sale or
exchange of services. It is equivalent to
10% of the gross selling price or gross value
in money of goods or properties sold,
bartered or exchanged or of the gross
receipts from the sale or exchange of
services. Republic Act No. 7716 seeks to
widen the tax base of the existing VAT
system and enhance its administration by
amending the National Internal Revenue
Code.
The contention of petitioners is that in
enacting Republic Act No. 7716, or the
Expanded Value-Added Tax Law, Congress
violated the Constitution because, although
H. No. 11197 had originated in the House of
Representatives, it was not passed by the
Senate but was simply consolidated with the
Senate version (S. No. 1630) in the
Conference Committee to produce the bill
which the President signed into law.
produced. To insist that a revenue statute
— and not only the bill which initiated the
legislative process culminating in the
enactment of the law — must substantially
be the same as the House bill would be to
deny the Senate's power not only to "concur
with amendments" but also to "propose
amendments." It would be to violate the
coequality of legislative power of the two
houses of Congress and in fact make the
House superior to the Senate.
What the Constitution simply means is that
the initiative for filing revenue, tariff, or tax
bills, bills authorizing an increase of the
public debt, private bills and bills of local
application must come from the House of
Representatives on the theory that, elected
as they are from the districts, the members
of the House can be expected to be more
sensitive to the local needs and problems.
On the other hand, the senators, who are
elected at large, are expected to approach
the same problems from the national
perspective. Both views are thereby made
to bear on the enactment of such laws.

Issue: Whether RA 7716 did not originated

from the House of Representatives?
Held:
To begin with, it is not the law — but the
revenue bill — which is required by the
Constitution to "originate exclusively" in the
House of Representatives. It is important to
emphasize this, because a bill originating in
the House may undergo such extensive
changes in the Senate that the result may
be a rewriting of the whole. At this point,
what is important to note is that, as a result
of the Senate action, a distinct bill may be

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FAILMA, LORELYN F.
TAXATION LAW I
15. No appropriation or use of public money for religious purposes
Gregorio Aglipay vs Juan Ruiz
GR No. L-45459, March 13,1937
Laurel, J.:
Facts:
The petitioner, Mons. Gregorio Aglipay,
Supreme Head of the Philippine
Independent Church, seeks the issuance
from this court of a writ of prohibition to
prevent the respondent Director of Posts
from issuing and selling postage stamps
commemorative of the Thirty-third
International Eucharistic Congress.
The Director of Posts announced in the
dailies of Manila that he would order the
issues of postage stamps commemorating
the celebration in the City of Manila of the
Thirty-third international Eucharistic
Congress, organized by the Roman Catholic
Church.
It is alleged that this action of the
respondent is violative of the provisions of
section 23, subsection 3, Article VI, of the
Constitution of the Philippines, which
provides No public money or property shall
ever be appropriated, applied, or used,
directly or indirectly, for the use, benefit, or
support of any sect, church, denomination,
secretarian, institution, or system of religion,
or for the use, benefit, or support of any
priest, preacher, minister, or other religious
teacher or dignitary as such, except when
such priest, preacher, minister, or dignitary
is assigned to the armed forces or to any
penal institution, orphanage, or leprosarium.
Issue: Whether there is a violation of the
provision of the consitution
Held:
None. According to the Supreme Court he
stamps were not issue and sold for the
benefit of the Roman Catholic Church. Nor
were money derived from the sale of the
stamps given to that church. On the
ATTY. J. IBE
contrary, it appears from the latter of the
Director of Posts of June 5, 1936,
incorporated on page 2 of the petitioner's
complaint, that the only purpose in issuing
and selling the stamps was "to advertise the
Philippines and attract more tourist to this
country." The officials concerned merely,
took advantage of an event considered of
international importance "to give publicity to
the Philippines and its people.
What is emphasized is not the Eucharistic
Congress itself but Manila, the capital of the
Philippines, as the seat of that congress. It
is obvious that while the issuance and sale
of the stamps in question may be said to be
inseparably linked with an event of a
religious character, the resulting
propaganda, if any, received by the Roman
Catholic Church, was not the aim and
purpose of the Government. We are of the
opinion that the Government should not be
embarassed in its activities simply because
of incidental results, more or less religious
in character, if the purpose had in view is
one which could legitimately be undertaken
by appropriate legislation. The main
purpose should not be frustrated by its
subordinate to mere incidental results not
contemplated.
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FAILMA, LORELYN F.
TAXATION LAW I
16. Due Process –
SISON VS ANCHETA
GR No. L-59431, July 25, 1984
Fernando, C. J,:
Facts:
The assailed provision further amends
Section 21 of the National Internal Revenue
Code of 1977, which provides for rates of
tax on citizens or residents on (a) taxable
compensation income, (b) taxable net
income, (c) royalties, prizes, and other
winnings, (d) interest from bank deposits
and yield or any other monetary benefit from
deposit substitutes and from trust fund and
similar arrangements, (e) dividends and
share of individual partner in the net profits
of taxable partnership, (f) adjusted gross
income. 2 Petitioner 3 as taxpayer alleges
that by virtue thereof, "he would be unduly
discriminated against by the imposition of
higher rates of tax upon his income arising
from the exercise of his profession vis-a-vis
those which are imposed upon fixed income
or salaried individual taxpayers. 4 He
characterizes the above sction as arbitrary
amounting to class legislation, oppressive
and capricious in character 5 For petitioner,
therefore, there is a transgression of both
the equal protection and due process
clauses 6 of the Constitution as well as of
the rule requiring uniformity in taxation.
Issue: Whether the Batas Pambansa 135
violates the Due Process Clause?
Held:
The power to tax moreover, to borrow from
Justice Malcolm, "is an attribute of
sovereignty. It is the strongest of all the
powers of of government." 13 It is, of
course, to be admitted that for all its
plenitude 'the power to tax is not
unconfined. There are restrictions. The
Constitution sets forth such limits .
Adversely affecting as it does properly
rights, both the due process and equal
protection clauses inay properly be invoked,
ATTY. J. IBE
all petitioner does, to invalidate in
appropriate cases a revenue measure.
It is undoubted that the due process clause
may be invoked where a taxing statute is so
arbitrary that it finds no support in the
Constitution. An obvious example is where it
can be shown to amount to the confiscation
of property. That would be a clear abuse of
power. It then becomes the duty of this
Court to say that such an arbitrary act
amounted to the exercise of an authority not
conferred. That properly calls for the
application of the Holmes dictum. It has also
been held that where the assailed tax
measure is beyond the jurisdiction of the
state, or is not for a public purpose, or, in
case of a retroactive statute is so harsh and
unreasonable, it is subject to attack on due
process grounds.
In the case of the gross income taxation
embodied in Batas Pambansa Blg. 135, the,
discernible basis of classification is the
susceptibility of the income to the
application of generalized rules removing all
deductible items for all taxpayers within the
class and fixing a set of reduced tax rates to
be applied to all of them. Taxpayers who
are recipients of compensation income are
set apart as a class. As there is practically
no overhead expense, these taxpayers are
e not entitled to make deductions for income
tax purposes because they are in the same
situation more or less. On the other hand, in
the case of professionals in the practice of
their calling and businessmen, there is no
uniformity in the costs or expenses
necessary to produce their income. It would
not be just then to disregard the disparities
by giving all of them zero deduction and
indiscriminately impose on all alike the
same tax rates on the basis of gross
income. There is ample justification then for
the Batasang Pambansa to adopt the gross
system of income taxation to compensation
income, while continuing the system of net
income taxation as regards professional and
business income.
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FAILMA, LORELYN F.
TAXATION LAW I ATTY. J. IBE

The classification is considered valid and

17. Equal Protection- reasonable provided that: (1) it rests on
substantial distinctions; (2) it is germane to
British American Tobacco vs. Camacho
the purpose of the law; (3) it applies, all
GR No. 163583, April 15, 2009
things being equal, to both present and
Ynares- Santiago, J.:
future conditions; and (4) it applies equally
to all those belonging to the same class.
Facts:
Petitioner argues that the classification
freeze provision violates the equal
protection and uniformity of taxation clauses
because Annex "D" brands are taxed based
on their 1996 net retail prices while new
brands are taxed based on their present day
net retail prices. Citing Ormoc Sugar Co. v.
Treasurer of Ormoc City,2 petitioner asserts
that the assailed provisions accord a special
or privileged status to Annex "D" brands
while at the same time discriminate against
other brands.

Issue: Whether the provision violated the

equal protection clause?

Held:
These contentions are without merit and a
rehash of petitioner’s previous arguments
before this Court. As held in the assailed
Decision, the instant case neither involves a
suspect classification nor impinges on a
fundamental right. Consequently, the
rational basis test was properly applied to
gauge the constitutionality of the assailed
law in the face of an equal protection
challenge. It has been held that "in the
areas of social and economic policy, a
statutory classification that neither proceeds
along suspect lines nor infringes
constitutional rights must be upheld against
equal protection challenge if there is any
reasonably conceivable state of facts that
could provide a rational basis for the
classification."3 Under the rational basis
test, it is sufficient that the legislative
classification is rationally related to
achieving some legitimate State interest

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FAILMA, LORELYN F.
TAXATION LAW I ATTY. J. IBE

It may be true that in the case at bar the

18. Religious Freedom –
AMERICAN BIBLE VS CITY OF MANILA
GR No. L-9637, April 30, 1957
Felix, J.:
Facts:
Plaintiff is a foreign, non-stock, non-profit,
religious, missionary corporation duly
registered and doing business in the
Philippines through its Philippine agency
established in Manila in November, 1898 is
distributing and selling bibles and/or
gospels. its Treasurer of the City of Manila
informed plaintiff that it was conducting the
business of general merchandise since
November, 1945, without providing itself
with the necessary Mayor's permit and
municipal license, in violation of Ordinance
No. 3000, as amended, and Ordinances
Nos. 2529, 3028 and 3364, and required
plaintiff to secure, within three days, the
corresponding permit and license fees,
together with compromise covering the
period from the 4th quarter of 1945 to the
2nd quarter of 1953, in the total sum of
P5,821.45
Issue:
Whether the said ordinances restrains the
free exercise and enjoyment of the religious
profesion
price asked for the bibles and other religious
pamphlets was in some instances a little bit
higher than the actual cost of the same but
this cannot mean that appellant was
engaged in the business or occupation of
selling said "merchandise" for profit. For this
reason We believe that the provisions of
City of Manila Ordinance No. 2529, as
amended, cannot be applied to appellant,
for in doing so it would impair its free
exercise and enjoyment of its religious
profession and worship as well as its rights
of dissemination of religious beliefs.
It seems clear, therefore, that Ordinance
No. 3000 cannot be considered
unconstitutional, even if applied to plaintiff
Society. But as Ordinance No. 2529 of the
City of Manila, as amended, is not
applicable to plaintiff-appellant and
defendant-appellee is powerless to license
or tax the business of plaintiff Society
involved herein for, as stated before, it
would impair plaintiff's right to the free
exercise and enjoyment of its religious
profession and worship, as well as its rights
of dissemination of religious beliefs, We find
that Ordinance No. 3000, as amended is
also inapplicable to said business, trade or
occupation of the plaintiff.

Held:
No. Predicated on this constitutional
mandate, plaintiff-appellant contends that
Ordinances Nos. 2529 and 3000, as
respectively amended, are unconstitutional
and illegal in so far as its society is
concerned, because they provide for
religious censorship and restrain the free
exercise and enjoyment of its religious
profession, to wit: the distribution and sale
of bibles and other religious literature to the
people of the Philippines.

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FAILMA, LORELYN F.
TAXATION LAW I ATTY. J. IBE

19. Non-impairment of obligations and contracts

TOLENTINO VS SEC OF FINANCE
GR No. 115455, August 25, 1994
Mendoza, J.:
Facts:
These are motions seeking reconsideration
of our decision dismissing the petitions filed
in these cases for the declaration of
unconstitutionality of R.A. No. 7716,
otherwise known as the Expanded Value-
Added Tax Law. CREBA asserts that R.A.
No. 7716 (1) impairs the obligations of
contracts, (2) classifies transactions as
covered or exempt without reasonable basis
and (3) violates the rule that taxes should
be uniform and equitable and that Congress
shall "evolve a progressive system of
taxation."
CREBA asserts that R.A. No. 7716 impairs
the obligations of contracts, and violates the
rule that taxes should be uniform and
equitable and that Congress shall “evolve a
progressive system of taxation”.
one, interferes with a contract or impairs its
obligation, within the meaning of the
Constitution. Even though such taxation
may affect particular contracts, as it may
increase the debt of one person and lessen
the security of another, or may impose
additional burdens upon one class and
release the burdens of another, still the tax
must be paid unless prohibited by the
Constitution, nor can it be said that it
impairs the obligation of any existing
contract in its true legal sense." (La Insular
v. Machuca Go-Tauco and Nubla Co-Siong,
39 Phil. 567, 574 (1919)
Contracts must be understood as having
been made in reference to the possible
exercise of the rightful authority of the
government and no obligation of contract
can extend to the defeat of that authority

CUP argues that legislature was to adopt a

definite policy of granting tax exemption to
cooperatives that the present Constitution
embodies provisions on cooperatives. To
subject cooperatives to the VAT would,
therefore, be to infringe a constitutional
policy.
Issue: Whether it violated the impairment
of obligations and contracts?

Held:

The short answer to this is the one given by

this Court in an early case: "Authorities from
numerous sources are cited by the plaintiffs,
but none of them show that a lawful tax on a
new subject, or an increased tax on an old

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